Among 15 Wall Street strategists, the average S&P 500 year-end target sits at 1412, according to Jason Goepfert, market-sentiment watcher at Sundial Capital Research, up from 1401 at the end of last week. That means these leading strategists, who are notoriously a bullish bunch, expect the index will drop about 2.5% from current levels by the end of the year.

Historically speaking, the wide disparity between these estimates and where stocks trade isn’t a good sign for future performance.

He charted the so-called spread depicting how the S&P 500 has traded throughout the years compared to strategist projections. “The spread is almost always negative,” Goepfert explains, “because the S&P 500 rarely shoots ahead so fast that it exceeds strategists’ estimates.”

Since 1999, there have been “only a handful of times” in which the spread went positive, such as the current environment, where stocks traded higher than the strategists’ estimates. The fact that the spread is currently larger than 2% is even rarer.

“Stocks’ performance after these periods of moving-too-fast-for-strategists-to-keep up has been rocky,” Goepfert says.

Jonathan Golub at UBS currently has the highest year-end target on the Street, at 1525, while Andrew Garthwaite at Credit Suisse has a 1500 target. Adam Parker at Morgan Stanley and David Kostin at Goldman Sachs are the most bearish, with 1167 and 1250 price targets, respectively. Barry Knapp at Barclays has a 1330 estimate and Savita Subramanian at Bank of America has a 1450 projection.

Such positive spreads occurred in the late 1990s, before the tech bust, as well as early 2007, prior to the market’s all-time highs and subsequent financial crisis.

“The only time the S&P managed to rise almost unabated was in September 2009 as the market rocketed out of the bear market bottom,” he says. “Other than that, if the S&P managed to gain in the short-term, it gave back those gains during a subsequent correction.”

Sundial Capital Research

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